By Brian Lizzi, AIF, CFS, Senior Retirement Plan Consultant, TriBridge Partners LLC
Unique circumstances make saving for retirement a challenge for women. On average, not only are women earning less than men, but they’re living longer as well. In a recent newsletter, Fidelity reported, “Women earn just two-thirds of the salary men do.” Additionally, “of the population over age 90 today, three-quarters of them are women.” Also affecting their ability to save are gaps in employment many women experience while raising children or caring for aging parents. With the odds stacked against them, it’s no wonder many women find saving for retirement overwhelming or even impossible.
In actuality, women possess inherent qualities that prove advantageous when it comes to the topic of retirement. They are natural planners and savers. In fact despite earning less, women save a greater percentage of their income (8.3% vs. men at 7.9%). Women also take less risk when it comes to investing. Their investing strategies include “higher allocations in blended assets, having lower allocations in company stock, and investing solely in a target date fund.” This less aggressive investing approach proves to work. After 10 years, the return is almost the same for men and women (with men’s at 7.4% and women’s at 7.3%) but women have taken less risk, according to Fidelity. (Note – In a TDF, the target date is the approximate date when investors plan to withdraw money. The principal value of the TDFs is not guaranteed at any time, including at the target date. Since the fund objectives change over time, the investment objectives and strategies will change to become more conservative as the target date approaches.)
To become empowered to save, women need to feel confident and the good news is that they are gaining it. Prior to the 2008 market downturn, only 29% of women felt financially confident, whereas now that number has grown to 57%.
Knowledge is power and the more female participants become educated in retirement planning, the more successful they will be. Knowing what they’re facing and gaining financial confidence will help women build meaningful retirement savings. Whether you are a woman or have an important one in your life (wife, mother, daughter), everyone should acknowledge the obstacles facing women and work toward overcoming them. Inquire with your Human Resources department about company matches, automatic enrollment, and other features available to help women become retirement savvy.
1 Fidelity Forum: Woman Saving for Retirement: http://dcda.fidelity.com/public/content/WPSFidelityPerspectives/pages/FF_NEWS_womenSavingForRetirement_041913?DCSext.w_loc=FidPer